Reshaping the International Monetary System

A major turning point

On February 27^th the European Union declared Russia’s currency reserves unusable. The west also excluded some banks from using the SWIFT system. This sent a signal to the rest of the world, that no matter how big or powerful one might be, the reserves could be rendered useless at any moment. This doesn’t send a great message of stability and prudence, no matter on which side one might find himself. The same message is now floating in the minds of rich people all over the world, who might not have the best relations with the west. This has given de-dollarization another great push.

An Anchor is needed

With this the US-Dollar has lost all remaining claims of neutrality, something that a global reserve currency desperately needs to be trusted. This has brought gold back into the picture. After turning the international monetary system shoved gold aside 50 years ago, it could now be brought back as the great saviour. But before this happens, the problem of the gold coverage needs to be solved.

Gold and the Central Banks

The low point of central banks in terms of gold positions certainly lay in the past. All over the globe but especially in developing countries, central banks have been steadily increasing the amount of gold they hold. This is in stark contrast to most western central banks, which at best have maintained their gold position. Another problem is, that with the vast increase of the money supply over the past decades, even a small coverage of gold, would greatly increase the price of gold. A changing monetary system should therefore be looked at as a great opportunity for gold and therefore gold investors. Even if gold only gets to play a small role in the new monetary system, the upside for gold investors would already be big.

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